Call it what you will, but in smallholder finance, subsidy is here to stay. Like many nascent markets, particularly those that target bottom of the pyramid consumers, investing in global smallholder finance requires some form of subsidy to mitigate risks and create an investable opportunity. While funders and investors can leverage many different types of subsidy our new ISF Briefing Note examines the dynamics shaping one particular and important form — grant funding from international donors. In 2016, our state of the sector report Inflection Point coined the term “smart subsidy,” referring to the strategic use of private and philanthropic capital to mitigate risks in smallholder investments. Understanding the current subsidy dynamics is a first step on the path to making subsidy “smarter” going forward.